21. Suppose that the utility function for nonnegative amounts of money for some risk-averse agent equals the square root of the dollar amount. For example, U($49) = 7 and U($100) = 10. Given the choice between two lotteries A = [1.0, $36] and B = [p, S0 ; 1 - p, $100], what probability p would make this agent indifferent between these two lotteries? (а) 0.2 (b) 0.4 (c) 0.6 (d) 0.8

21. Suppose that the utility function for nonnegative amounts of money for some risk-averse agent equals the square root of the dollar amount. For example, U($49) = 7 and U($100) = 10. Given the choice between two lotteries A = [1.0, $36] and B = [p, S0 ; 1 - p, $100], what probability p would make this agent indifferent between these two lotteries? (а) 0.2 (b) 0.4 (c) 0.6 (d) 0.8

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.5P

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